prepared by addison addison/pfizer center for plain ...that enhancing our executive compensation...

© 2007 Addison

/ Prepared by Addison1

ADDISON/PFIZERCENTER FOR PLAIN LANGUAGE ANNUAL SYMPOSIUM

OCTOBER 12, 2007

EXECUTIVE COMPENSATION AND ANALYSIS:PLAIN ENGLISH AND INFORMATION DESIGN INITIATIVE

/ Prepared by Addison

CONTENT

3 Background5 Objectives7 Approach9 Methodology15 What we learned19 Concept Model30 Summary

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© 2007 Addison

BACKGROUND

Why Pfizer Did It?

• Our new CEO, Jeff Kindler believes in communication and transparency and has implemented major changes at Pfizer during his tenure. Given his initiative, this was a logical project for us to undertake.

• Before the SEC put forth the new expanded disclosure requirement, our Board of Director’s believed we should go ahead and incorporate the expanded executive compensation disclosure in the proxy.

• Pfizer believes in transparency and taking this step was appropriate and essential to us in fulfilling our commitment to exercise good governance practices.

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© 2007 Addison

BACKGROUND {continued}

Why Pfizer Did It?

• Our shareholders requested this information and we believed that enhancing our executive compensation disclosure was the right thing to do. The Board wants to communicate well with its investors.

• For us, it was easier to implement early and ahead of the requirements.

• However, now that we’ve done it – we decided it was a good time to look at it again from a readability and user standpoint.

• If the CD&A is not understandable and clear to the average investor – then it’s not serving its purpose in adding value to our investors.

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© 2007 Addison

PRIMARY OBJECTIVE

ADDISON’S DESIGN BRIEF

“Disclose ‘the one number’ that sums up the named executives compensation from all sources.”Christopher Cox, MSNBC, September 5, 2007

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© 2007 Addison

OTHER OBJECTIVES

ADDISON’S DESIGN BRIEF

Answer the other questions on investors’ minds regarding:

1. Why did the company choose to pay what was paid?

2. What is the compensation policy?

3. How does the policy work?- What are the targets? Were they met?

- What are the matrices for these targets?

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© 2007 Addison

APPROACH

How We Did It

First, we had to look at it from the reader’s perspective and reorganize the contents. We regrouped “like” items so the reader could compare charts, tables, etc.

Second, we put everything into the present tense.

Third, we identified and eliminated redundancies.

And last, made sure we used short, succinct sentences.

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© 2007 Addison

APPROACH

We applied our Information Design methodology that moves towards asking the question, “How can we provide information that people want?” and, in effect, worked towards offering the right information for the right reason.

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METHODOLOGY

12 USER TESTING

13 PARTICIPANTS

15 WHAT WE LEARNED

19 CONCEPT MODEL

22 TOUR OF THE CONCEPT

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© 2007 Addison

APPROACH

What is Information Design?The ability to translate complex or unstructured data into valuable and meaningful information. The intention is to achieve particular objectives in relation to the needs of users.

Information design requires an interdisciplinary approach combining skills in design, content and human factors.

It identifies and builds values based on a deep understanding of customer needs and having empathy for them.

Information design can be quantified and qualified.

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© 2007 Addison

TESTING

We applied a user-centered approach that requires the end-user to participate in “co-creating” the experience.

We identified the main audience:Shareholders and analysts – their needs aredifferent since these are not homogeneous groups.

We employed a set of research techniques and processes for understanding the audience and the problems.

This helped us generate the concept.We tested the concept against our audiencevalue.

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© 2007 Addison

PARTICIPANTS

USER TESTING

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© 2007 Addison

PARTICIPANTS

User Group

10 participants uncover 80% of the problems on average.

–Faulkner (2003)

Who did we test with?

• 10 people who work at Addison

• Shareholders from 0-5 years up to 20+ years

• Individuals with varying levels of experience with executive compensation reports

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© 2007 Addison

PARTICIPANTS

Testing

What kind of testing did we do?

Target Audience EvaluationMethod: Card Sorting – matching financial terms from the report to their definitions

Objective: To see how familiar shareholders are with these terms

Prototype TestingMethod: Questionnaire and Rating Scale – finding answers to given questions and rating this experience on a scale of “very difficult” to “very easy”

Objective: To obtain qualitative data for concept validation and to determine whether issues from the original report are being addressed and resolved in the redesigned report.

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© 2007 Addison

WHAT WE LEARNED

Method: Card Sorting – matching financial terms from the report to their definitions

Results:

• No one matched every definition correctly

• The average number of correct matches was 8/10

• The number of correct matches ranged from 6/10 to 9/10

• Commonly mismatched terms (matched incorrectly by 3 or more participants) included:• SIFL

• Perquisites

• Put

• Change in Control

What does this tell us?

• Investors have varying levels of knowledge of financial terminology

• There is an opportunity for plain English writing in these reports to increase understanding

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© 2007 Addison

WHAT WE LEARNED

Method: Questionnaire and Rating Scale – finding answers to given questions and rating this experience on a scale of “very difficult” to “very easy”

Results:

• On a scale of 1-5, how easy was it to find the answers to your questions? (1=very difficult to find, 5=very easy to find)

• Current Report: Avg. rating was 2.5

• Redesigned Report: Avg. rating was 4.6


• The experience of finding answers to the questions was significantly better for users with the redesigned report

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© 2007 Addison

WHAT WE LEARNED

Method: Questionnaire and Rating Scale

Current Report: Themes

• A hierarchy of headings, sub-headings, etc. is missing

• There is no up-front at-a-glance view of the things you might want to know

• The table of contents needs to be more detailed

• The realized compensation is not calculated

• Some of the terms need to be defined

• Executive’s titles are not given at the outset

“I feel like it was sheer luck that I found the answer.”

“But I don’t even know who the CFO is.”

“I would have to add it up. I don’t see a total.”

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© 2007 Addison

WHAT WE LEARNED

Method: Questionnaire and Rating Scale

Redesigned Report

“This has a much better Table of Contents”

“Basically, I got what I asked for – all the elements (salary, bonus, perqs, etc.).That’s it, right up front. If I didn’t feel the need to drill down, this spread would tell me all I need to know.”

“I see this one has high-level callouts. Nice.”

“I love being able to see the realized totals.”


• Many of the issues in the current report are being addressed in the redesigned version.

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© 2007 Addison

CONCEPT MODEL

BEFORE AND AFTER: PLAIN ENGLISH REWRITE

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After: The Compensation Committee sets the overall compensation philosophy at Pfizer. Our goal is to ensure that the compensation we pay our executive officers is closely aligned with Pfizer’s long-term and short-term performance and that the compensation will help us attract, motivate, and retain key executives critical to our long-term success. We have structured our compensation so that a significant portion is directly connected to Pfizer’s stock performance and to other factors that directly and indirectly affect shareholder value. To carry out its responsibilities more effectively, as well as to link executive pay with performance, we have taken a number steps. We have increased the number of executive sessions it held without management being present; retained an independent compensation consultant to advise it on executive compensation issues; aligned compensation structures based on median target pay, replacing the 75th percentile for long-term incentives and actual pay for cash compensation. established a pharmaceutical peer group for primary pay and performance comparisons that more closely tracks Pfizer’s core business; established a Fortune 100 comparator group for supplemental pay comparisons to help align target compensation with median competitive general industry data; strengthened the link between CEO pay and shareholder value through specific objectives and realignment of salary, target bonus, and stock options; established annual reviews of detailed compensation tally sheets for the Named Executive Officers; placed limitations on executive change-in-control severance pay and on executive pensions; established policies for the recapture of compensation to executives if certain acts occur; eliminated tax gross up for imputed income relating to use of company automobiles, effective January 1, 2007; reached a separation agreement with the former CEO and fully disclosed all separation payments, which were limited to what we were contractually obligated to pay; and made no employment contract with our new CEO, maintaining an employment at will relationship. We will continue to compensate executives by emphasizing performance-based compensation with a balance between the company’s short- and long-term performance, and a balance between the company’s performance against its strategic plan, financial performance, and shareholder return.

Before: As stated in its Charter, the Compensation Committee sets the overall compensation philosophy at Pfizer. The objective of the Executive Compensation Program is to ensure that compensation paid to executive officers is closely aligned with the performance of the Company on both a short-term and long term basis, and that such compensation assists the Company in attracting, motivating and retaining key executives critical to its long term success. Compensation is structured to ensure that a significant portion of compensation opportunity will be directly related to Company stock performance and other factors that directly and indirectly influence shareholder value. Both management and the Compensation Committee recognize the importance of maintaining sound principles for the development and administration of compensation and benefit programs. Our Compensation Committee has taken steps to significantly enhance its ability to effectively carry out its responsibilities, as well as to ensure that the Company maintains strong links between executive pay and performance. Examples of actions that the Committee has taken in the past few years include. Made significant changes in the executive compensation program, including aligned compensation structures based on median target pay formerly 75th percentile for long term incentives and actual pay for cash compensation. Established a pharmaceutical peer group for primary pay and performance comparisons that more closely aligns with our core business. Established a Fortune 100 comparator group for supplemental pay comparisons to assist in the alignment of target compensation with median competitive general industry data. Strengthened the link between the CEO pay and shareholder value through specific objectives and realignment of salary, target bonus and stock options for example, the stock option award granted to Mr. Kindler on becoming CEO is directly tied to the performance of the Company and is only exercisable if the average price of Pfizer stock exceeds a specified threshold for a designated period of time. Established annual reviews of detailed compensation tally sheets for the Named Executive Officers. Initiated limitations on executive change in control severance and, prospectively on executive pensions. Established policies regarding recapture of compensation to executives if certain acts occur. Eliminated tax gross up for imputed income relating to use of Company automobiles, effective January 1, 2007. Reached separation agreement with former CEO and fully disclosed all payments to be made upon his departure, which were limited to those amounts we were contractually obligated to pay under his employment agreement, and no employment contract with new CEO maintained employment at will relationship. Increased the number of executive sessions of the Committee held without Company management present. Retained an independent compensation consultant to advise on executive compensation issues. The Committee intends to continue its strategy of compensating executives through programs that emphasize performance based incentive compensation. Executive compensation is tied directly to the performance of the Company and is structured to ensure that, due to the nature of the business, there is an appropriate balance between short and long term performance of the Company, and also a balance between the Company’s performance against its strategic plan, financial performance and shareholder return.


© 2007 Addison

CONCEPT MODEL

BEFORE AND AFTER: REORGANIZED CONTENT

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Executive Compensation Compensation Committee Report Compensation Discussion and Analysis Principles and Objectives of Executive compensation Program Elements of Executive Compensation Salaries Annual Cash Incentive Awards Table of Annual Cash Incentive Awards Long-Term Equity Incentive Awards Stock Options Stock Option Grant Policy Restricted Stock and Restricted Stock Unit Awards Performance Share Awards Performance Share Award Program Relative Performance/Payout Matrix

Recently Completed Performance Periods – Previous Performance-Contingent Share Award Program

Table of Share Payout for 2002-2006 Performance Period Deferral Opportunities In-Service and Post-Employment Benefits List of Health and Welfare Benefits for Named Executive Officers Perquisites Stock Ownership Requirements Table of Stock Ownership Trading in Pfizer Stock Derivatives Financial Restatement Tax Deductibility of Pay Benchmarking Table of Comparative Financial Measures List of General Industry Comparator Group CEO Compensation and Evaluation of Executive Performance Evaluation of Mr. Kindler’s Performance 2007 Compensation Actions Table of 2006 Compensation (including 2007 Compensation Actions) 2007 Executive Long-Term Incentive Grant Table of 2007 Executive Long-Term Incentive Grant 2007 Cash Compensation Table of 2007 Salaries and Target Annual Cash Incentive (Bonus) Amounts

Our Compensation Program The Goal of Our Program What Goes into Executive Compensation Whom We Measure Ourselves Against Our Pharmaceutical Peer Group Table of Comparative Financial Measures List of General Industry Comparison Group How We Evaluate Executive Performance Evaluation of Mr. Kindler’s Performance Compensation for Jeffrey B. Kindler Policy in Event of Financial Restatement Tax Deductibility of Compensation Rewarding Short-term Performance Salaries Annual Cash Incentive Awards Table of 2006 Annual Cash Incentive Awards Benefit Plans List of Health and Welfare Benefits for Named Executive Officers Rewarding Long-term Performance Our Long-Term Incentive Program Stock Ownership Requirements Table of Stock Ownership Requirements Restrictions on Trading in Pfizer Stock What Goes into Long-Term Performance Awards Stock Options How we Determine Stock Options How We Price Stock Options Restricted Stock Unit Awards Performance Share Program How We Determine Performance Share Awards Performance Share Award Program Relative Performance/Payout Matrix Table Performance-Contingent Share Program How We Determine Performance-Contingent Share Awards Table of Performance Share Payout for 2002-2006 Performance Period Deferring Compensation Deferring Performance Share Awards Deferring Performance-Contingent Share Awards Deferring Restricted Stock Units Deferring Cash Incentive Awards Deferring Amounts in the Supplemental Savings Plan


© 2007 Addison

Employment & Post-employment Benefits Perquisites Table of 2006 Incremental Cost of Perquisites Provided to Named Executive Officers Company Aircraft Tax Reporting – Personal Use of Aircraft Car and Driver Other Perquisites Pfizer Savings Plans Savings Plan Supplemental Savings Plan Disability and Death Benefits Disability Benefits Death Benefits Post-Employment Benefits Table of 2006 Pension Benefits Pfizer Retirement Annuity Plan Table of Pension Plan Assumptions Early Retirement Provisions Post-Retirement Benefits for Legacy Employees Change-in-Control Payments Table of Estimated Benefits Following a Change in Control Estimated Separation Payments Restructuring Table of Estimated Separation Payments Restructuring 2006 Executive Compensation Tables Equity Compensation Plan Information Table of Equity Compensation Plan 2006 Summary Compensation Table 2006 Grants of Plan Based Awards Table of 2006 Grants of Plan Based Awards Table of Outstanding Equity Awards at Fiscal Year-End 2006 Table of 2006 Option Exercises and Stock Vested Table Table of 2006 Non-qualified Deferred Compensation 2007 Executive Compensation Tables 2007 Compensation Actions Table of 2006 Compensation (including 2007 Compensation Actions) 2007 Executive Long-Term Incentive Grant Table of 2007 Executive Long-Term Incentive Grant 2007 Cash Compensation Table of 2007 Salaries and Target Annual Cash Incentive (Bonus) Amounts Severance Arrangements and Departure of Former Executive Officers Departure of Former Chief Executive Officer Table of Dr. McKinnell’s Outstanding Prorated Performance Shares (2006)

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Severance Arrangements and Departure of Former Executive Officers Departure of Former Chief Executive Officer Table of Dr. McKinnell’s Outstanding Prorated Performance Shares (2006) Departure of Ms. Katen Table of Ms. Katen’s Outstanding Prorated Performance Shares (2006) Executive Compensation Tables 2006 Summary Compensation Table Perquisites Table of 2006 Incremental Cost of Perquisites Provided to Named Executive Officers Company Aircraft Tax Reporting – Personal Use of Aircraft Car and Driver Other Perquisites Pfizer Savings Plans Deferral of Performance Shares and Other Awards 2006 Grants of Plan Based Awards Table of 2006 Grants of Plan Based Awards Table of Outstanding Equity Awards at Fiscal Year-End 2006 Table of 2006 Option Exercises and Stock Vested Table Table of 2006 Non-Qualified Deferred Compensation Table Post Employment Benefits Board Policy on Pension Benefits for Executives Table of 2006 Pension Benefits Pfizer Retirement Annuity Plan Table of Pension Plan Assumptions Early Retirement Provisions Potential Payments Upon Termination or Change-in-Control Payments Made Upon Disability Payments Made Upon Death Estimated Payments Upon Severance or Change-in-Control Estimated Termination Payments Estimated Benefits Upon Termination Following a Change in Control Table of Estimated Benefits Upon Termination Following a Change in Control Estimated Separation Payments Upon Termination Due to Restructuring Table of Estimated Separation Payments Upon Termination Due to Restructuring Equity Compensation Plan Information Table of Equity Compensation Plan

CONCEPT MODEL

BEFORE AND AFTER: REORGANIZED CONTENT

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© 2007 Addison

CONCEPT MODEL

TOUR OF THE CONCEPT22


© 2007 Addison

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COMPENSATION COMMITTEE REPORT

The Compensation Committee hasreviewed and discussed with management thefollowing Compensation Discussion andAnalysis section of the Company’s 2007 ProxyStatement. Based on its review and discussionswith management, the CompensationCommittee recommended to the Board ofDirectors that the Compensation Discussionand Analysis be included in the Company’sProxy Statement for 2007.

The Compensation Committee:

Mr. BurtMr. IkenberryMr. LorchDr. Mead (Chair)

COMPENSATION DISCUSSION & ANALYSIS

Principles and Objectives of ExecutiveCompensation Program

As stated in its Charter, the CompensationCommittee sets the overall compensationphilosophy at Pfizer. The objective of theExecutive Compensation Program is to ensurethat compensation paid to executive officersis closely aligned with the performance of theCompany on both a short-term and long-termbasis, and that such compensation assists theCompany in attracting, motivating andretaining key executives critical to its long-term success. Compensation is structured toensure that a significant portion ofcompensation opportunity will be directlyrelated to Company stock performance andother factors that directly and indirectlyinfluence shareholder value.

Both management and the CompensationCommittee recognize the importance ofmaintaining sound principles for thedevelopment and administration ofcompensation and benefit programs. OurCompensation Committee has taken steps tosignificantly enhance its ability to effectivelycarry out its responsibilities, as well as to ensurethat the Company maintains strong linksbetween executive pay and performance.

Examples of actions that the Committee hastaken in the past few years include:

• Made significant changes in theexecutive compensation program,including:

— Aligned compensation structuresbased on median target pay (formerly75th percentile for long-termincentives and actual pay for cashcompensation);

— Established a pharmaceutical peergroup for primary pay andperformance comparisons that moreclosely aligns with our core business;

— Established a Fortune-100 comparatorgroup for supplemental paycomparisons to assist in the alignmentof target compensation with mediancompetitive general industry data;

— Strengthened the link between theCEO pay and shareholder valuethrough specific objectives andrealignment of salary, target bonusand stock options (for example, thestock option award granted to Mr.Kindler on becoming CEO is directlytied to the performance of theCompany and is only exercisable if theaverage price of Pfizer stock exceeds aspecified threshold for a designatedperiod of time);

— Established annual reviews of detailedcompensation tally sheets for theNamed Executive Officers;

— Initiated limitations on executivechange-in-control severance and,prospectively on executive pensions;

— Established policies regardingrecapture of compensation toexecutives if certain acts occur;

— Eliminated tax gross-up for imputedincome relating to use of Companyautomobiles, effective January 1,2007;

Executive Compensation

CURRENT MODEL

BEFORE: NOT WELL ORGANIZED

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— Reached separation agreement withformer CEO and fully disclosed allpayments to be made upon hisdeparture, which were limited tothose amounts we were contractuallyobligated to pay under hisemployment agreement; and

— No employment contract with newCEO (maintained employment-at-willrelationship).

• Increased the number of executivesessions of the Committee held withoutCompany management present;

• Retained an independent compensationconsultant to advise on executivecompensation issues.

The Committee intends to continue itsstrategy of compensating executives throughprograms that emphasize performance-basedincentive compensation. Executivecompensation is tied directly to the performanceof the Company and is structured to ensure that,due to the nature of the business, there is anappropriate balance between short and long-term performance of the Company, and also abalance between the Company’s performanceagainst its strategic plan, financial performanceand shareholder return.

For 2006, the actual total compensation ofthe continuing Named Executive Officersgenerally fell slightly below the median of totalcompensation paid to executives holdingequivalent positions in the pharmaceutical peergroup companies. The Committee believes thatthese compensation levels are reasonable inview of the fact that the new managementteam has been in place since August 2006 andneeds adequate time to demonstrateperformance.

Compensation tally sheets for each of theNamed Executive Officers were reviewed bythe Committee in 2006. These tally sheetsaffixed dollar amounts to all components ofthe Named Executive Officers’ 2006compensation, including current pay (salaryand bonus), deferred compensation,outstanding equity awards, benefits,perquisites and potential change-in-controlseverance payments. The Committee willcontinue to review tally sheets at least on anannual basis.

Elements of Executive Compensation

The compensation program for executiveofficers consists of the following elements:

• Salaries

• Annual cash incentive (bonus) awards

• Long-term equity incentive awards,including:

— Stock Options

— Performance Shares

— Restricted Stock Units

• In-Service and Post-Employment Benefits

• Perquisites

The Committee has chosen these elementsof compensation to create a flexible packagethat reflects the long-term nature of thepharmaceutical business and can reward bothshort and long-term performance of theCompany and individual.

Salaries

Salaries are used to provide a fixedamount of compensation for the executive’sregular work. The salaries of the NamedExecutive Officers are reviewed on an annualbasis, as well as at the time of a promotion orother change in responsibilities. Increases insalary are based on an evaluation of theindividual’s performance and level of paycompared to pharmaceutical and generalindustry comparator group pay levels forsimilar positions. Salaries, in conjunction withtarget bonuses, are targeted to the mediancompetitive data for cash compensation.

The effective date of merit increasestypically is April 1st of each year. Increases insalaries are based on both individualperformance and the Company’s merit increasebudget for the year. Salary increases can alsooccur upon promotion. Any salary increase foran elected corporate officer must be approvedby our Compensation Committee.

Annual Cash Incentive Awards

Executive Officers may be awarded annualcash bonuses under the Pfizer Inc. ExecutiveAnnual Incentive Plan (“Annual Cash IncentivePlan”), approved by the shareholders in 1997.Under the Annual Cash Incentive Plan,

Type hierarchies communicate in one “volume”

The eye is not led to key information

No navigation aids throughout the document


© 2007 Addison

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For 2006, the financial objectives reflected asignificant level of difficulty for the executivesgiven the dynamic business environment and thechallenges posed by the loss of exclusivity forcertain key products. The strategic objectivesrequired each executive to produce significantresults and achieve challenging targets in order toqualify for target level incentive payments.Financial objectives were weighted at 25% for Mr.Kindler and in the range of 20% to 50% for theother continuing Named Executive Officers, andwere determined with reference to total revenueof $48.4 billion, adjusted diluted earnings pershare of $2.06, expense savings of $2.6 billion, aswell as an operating cash flow metric. TheCommittee also evaluated the new leadershipteam’s ability to deliver on the challenge ofdesigning strategies and actions needed toreorganize and drive the Company forward.

While these metrics were used as a guidelinein determining the portion of the annual cashincentives attributable to financial measures,we only use strict formulaic achievement offinancial metrics in the determination ofperformance share award payments. TheCompensation Committee incorporates flexibilityinto our bonus program to better align withthe evolving nature of our business. TheCompensation Committee may adjust theportion of the bonus related to financialobjectives upward or downward to better alignwith the overall total shareholder return.

A payment of $2,158,300 in lieu of a bonusfor 2006 was made to Dr. McKinnell pursuant tohis Employment Agreement, which is describedin detail in the section headed “Departure ofFormer Chief Executive Officer”.

Long-Term Equity Incentive Awards

Equity-based compensation and ownershipensures that the Company’s executive officershave a continuing stake in the long termsuccess of the Company. Each year in February,the Company grants long-term equity awardsto certain executives, based on an evaluation oftheir performance in the prior year. The awardsgranted in February 2007 are discussed in moredetail in the section headed “2007Compensation Actions”.

Mr. Kindler, the other Named ExecutiveOfficers and approximately 100 additionalexecutives participate in the Company’s long-term incentive program.

Under its long-term incentive program,Pfizer currently grants stock options, restrictedstock units and performance-based shareawards to eligible employees under the PfizerInc. 2004 Stock Plan (“2004 Stock Plan”). The2004 Stock Plan also permits the Company togrant equity-based awards to our non-employee Directors.

The 2004 Stock Plan replaced the 2001Performance-Contingent Share Award Plan,under which participating employees wereawarded performance based shares, and the2001 Stock and Incentive Plan, under whichparticipating employees were granted stockoptions, stock awards (including restricted stockand restricted stock unit awards) andperformance-based stock awards.

For 2006, long-term incentive awardsgenerally consisted of stock options,performance share awards and restricted stockunits. The value of any award is divided so thathalf of the target value is delivered in stockoptions, one quarter in performance shareawards and one quarter in restricted stock units.The target long-term incentive awards are setat the median of the Company’s peer groupdata, according to the employee’s level ofresponsibility in the Company.

All awards under our stock plans aresubject to non-competition and gain recaptureprovisions.

• Stock Options

Stock options provide a material incentiveto employees by providing an opportunity for alarger stock ownership stake in the Company.The ten-year term of the options seeks toreflect the long-term nature of the discoveryand development of new medicines.

Stock options are awarded under the 2004Stock Plan to the Named Executive Officers andcertain other executives of the Company inFebruary of each year. Prior to September 2006,stock options were issued with an exercise priceequal to the average of the highest and lowestprice on the date of the grant. The exercise pricefor option grants issued after September 2006is based on the closing price of Pfizer commonstock on the date of the grant. Stock optionswill have actual delivered compensation valueonly if the market price of the common stockincreases after the grant date.

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executives may earn bonuses based onCompany and individual performance criteria,subject to the established maximum of 0.3% ofthe Company’s Adjusted Net Income, asdefined in the Plan.

Annual cash incentive awards are designedto reward short-term performance andachievement of designated strategic results.The target bonus is established through ananalysis of compensation for comparablepositions in pharmaceutical and generalindustry peer group companies and is intendedto provide a competitive level of compensationwhen the executives achieve their performance

objectives. Combined salaries and target bonuslevels are intended to approximate thecompetitive median. Bonus levels aredetermined as a percentage of each executive’sbase salary. Performance objectives areapproved by the Compensation Committee.

The 2006 target and actual cash incentiveawards paid to each of the Named ExecutiveOfficers are shown in the table below. Theactual cash incentive awards are also shown inthe “Bonus” column of the SummaryCompensation Table in the ExecutiveCompensation Tables section which follows thisCompensation Discussion and Anaylsis.

2006 Annual Cash Incentive Awards

Target(1) Target Actual Payout as Payout Bonus Maximum Cash Actual

a % of Range as a Award Award Award Award as a Name Salary % of Salary ($) ($) ($) % of SalaryMr. Kindler 150% 0-300% $2,025,000 $4,050,000 $3,300,000 220%Mr. Shedlarz 77% 0-154% 773,500 1,547,000 1,263,400 125%Dr. LaMattina 62% 0-124% 538,700 1,077,400 718,300 82%Mr. Read 59% 0-118% 476,600 953,200 667,200 82%Mr. Levin 60% 0-120% 470,700 941,400 580,600 74%Ms. Katen 85% 0-170% 1,037,300 2,074,600 1,383,000 113%(1) Target bonuses at Pfizer typically are based on actual salary earned during the year and are set as a percentage of

the year’s salary. If an employee is promoted during the year, the target bonus percent may be increased. The actualbonus paid for the year would typically be calculated based on the portion of time that each target bonus percentapplied. Mr. Kindler’s bonus percent was adjusted to 150% of his year-end salary as a result of his promotion to CEOduring the year.

The actual cash incentive award isdetermined according to each NamedExecutive Officer’s level of achievement againsthis or her individual financial and strategicperformance objectives, and as a result, may beless than or greater than the target bonusamount. Prorated changes in the annual targetbonus levels can occur during the year if thereare changes in the officer’s salary grade levelthat warrant a target change (for example, asignificant change in level of responsibility).

In 2006, the performance objectives for theNamed Executive Officers generally includedthe following, depending on each Officer’s rolein the Company:

• Financial objectives—revenues, adjustedearnings per share, cash flow fromoperations, productivity cost savingsinitiatives and certain divisional financialmeasures with a focus on increasingshareholder value.

• Strategic objectives—deliver more newmedicines more quickly to patients;progress the Company’s Adapting toScale initiative; promote new directionsin health and wellness; shape a positiveenvironment for better healthcare;develop people, talent and organization;and other operating responsibilities, asappropriate.

In addition, as a result of the appointmentof a new CEO at the end of July, the newleadership team developed additionalobjectives which focused heavily on initiativesand strategies designed to reorganize theCompany, set a new direction for Pfizer andproduce long-term shareholder value. Thespecific objectives for each continuing NamedExecutive Officer are weighted according tothe extent to which the Officer will beresponsible for delivering the results on theindividual objectives.

CURRENT MODEL

BEFORE: DIFFICULT TO READ

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Important information and data are buried in dense text

Long, unbroken paragraphs are difficult to read and result in pages that are not visually appealing


© 2007 Addison

CONCEPT MODEL

AFTER: CLEAR HIERARCHY

25

A clear hierarchy: headlines, sub-heads and body text

Graphic elements are used to break up long, compli-cated text. This makes the information easy to read and understand.

Executive Compensation: Discussion and Analysis

Notice of Annual Meeting of Shareholders, Proxy Statement and 2006 Financial Report March 15, 2007 | 43

COMPENSATION COMMITTEE REPORTThe Compensation Committee has reviewedand discussed with management the followingCompensation Discussion and Analysis sectionof the Company’s 2007 Proxy Statement. Basedon its review and discussions, we recommendto the Board of Directors that theCompensation Discussion and Analysis beincluded in the Pfizer’s Proxy Statement for2007.

Mr. Burt

Mr. Ikenberry

Mr. Lorch

Dr. Mead, Chair

EXECUTIVE COMPENSATION

OUR COMPENSATION PROGRAM

THE GOAL OF OUR PROGRAMThe Compensation Committee sets the overall compensation philosophy at Pfizer. Our goal is to ensure that thecompensation we pay our executive officers is closely aligned with Pfizer’s long-term and short-term performanceand that the compensation will help us attract, motivate, and retain key executives critical to our long-term suc-cess. We have structured our compensation so that a significant portion is directly connected to Pfizer’s stock per-formance and to other factors that directly and indirectly affect shareholder value.

To carry out its responsibilities more effectively, as well as to link executive pay with performance, we have taken a number ofsteps. We have:

We will continue to compensate executives by emphasizing per-formance-based compensation with a balance between the com-pany’s short- and long-term performance, and a balance betweenthe company’s performance against its strategic plan, financialperformance, and shareholder return.

For 2006, the actual total compensation of the continuing NamedExecutive Officers generally fell slightly below the median of totalcompensation paid to executives holding equivalent positions inthe pharmaceutical peer group companies. We believe that thesecompensation levels are reasonable because the new manage-ment team has been in place since August 2006 and needs suffi-cient time to show how well it can perform.

We reviewed the compensation tally sheets for each of theNamed Executive Officers in 2006. These tally sheets specifieddollar amounts to all components of the Named ExecutiveOfficers’ 2006 compensation, including current pay (salary andbonus), deferred compensation, outstanding equity awards, bene-fits, perquisites, and potential change-in-control severance pay-ments. We will continue to review tally sheets at least annually.

+

Increasedthe number ofexecutive sessionsheld without man-agement beingpresent;

Retained an independentcompensationconsultant toadvise it on executive compen-sation issues;

Alignedcompensationstructures basedon median targetpay, replacing the75th percentile for long-termincentives andactual pay for cash compensation.

Establisheda pharmaceuticalpeer group for primary pay andperformance comparisons that more closelytracks Pfizer’score business;

Establisheda Fortune 100comparator groupfor supplementalpay comparisonsto help align tar-get compensationwith median competitive gen-eral industry data;

Strengthenedthe link betweenCEO pay andshareholder value through specific objectivesand realignmentof salary, targetbonus, and stockoptions;

Establishedannual reviews ofdetailed compensa-tion tally sheetsfor the NamedExecutive Officers;

Placedlimitations on executive change-in-control severancepay and on execu-tive pensions;

Establishedpolicies for therecapture of com-pensation to executives if certain acts occur;

Eliminatedtax gross up forimputed incomerelating to use of company auto-mobiles, effectiveJanuary 1, 2007;

Reacheda separation agree-ment with the for-mer CEO and fullydisclosed all sepa-ration payments,which were limitedto what we werecontractually obli-gated to pay; and

Madeno employmentcontract with ournew CEO, maintain-ing an employment at will relationship


© 2007 Addison

CONCEPT MODEL

AFTER: TOTAL COMPENSATION

26

Complex data from different tables is presented visually

The chart is tailored to Pfizer's compensation program, making it useful and meaningful

Data for each column is explained and cross-referenced

$335,454 $0 $422,091 $265,318

= $5,426,746

$1,008,225

$1,103,883

$253,641 $0 $1,381,064 $185,843

= $4,092,173

$873,275 $193,755 $0 $652,683 $88,058

= $2,526,071

$813,450 $190,410 $716,358 $455,792 $86,159

= $2,929,369

$784,575 $177,174 $498,690 $212,143 $70,345

= $2,323,527

$2,270,500 $0 $0 $4,845,937 $0 $383,517

= $7,499,414

$1,220,300 $317,802 $3,688,730 $17,426,208 $287,311

= $24,323,351

Actual: $3,300,000 (220%)

Maximum:$4,050,000

(300%)

April 1, 2007Salary:

$1,500,000

Target: $2,025,000(150%)

Salary:$1,103,883

(100%)

0%

Range of UnrealizedRestricted Stock

$2,736,265

Jan 1, 2007Salary:

$1,350,000

Range of Unrealized Restricted Option Awards

$1,971,676

Range of UnrealizedCompensation

$4,372,487


$6,183,297


$4,493,596


$1,849,930


$2,442,771

Range of UnrealizedCompensation$11,919,032


$4,671,727

Range of UnrealizedRestricted Option Awards

$3,255,375


$2,235,835


$1,104,982


$1,092,181


$8,448,787


$4,061,804

Perquisites$170,575

Perquisites$91,513

Perquisites$13,332

Perquisites$19,300

Perquisites$114,844

Perquisites$163,296

Perquisites$4,300

Actual: $1,263,400 (125%)

Maximum:$1,547,000

(154%)

Target:$773,500

(77%)


$1,070,300

Jan 1, 2007Salary:

$1,016,600

0%


$2,736,265

Actual: $1,383,000 (113%)

Maximum:$2,074,600

(170%)

Target:$1,037,300

(85%)

Salary:$1,220,300(100%)

0%

Actual: $718,300 (82%)

Maximum:$1,077,400

(124%)

Target:$538,700

(62%)

Salary:$873,275(100%)

Salary:$1,008,225(100%)


$920,000

Jan 1, 2007Salary:

$885,200


$920,000

Jan 1, 2007Salary:

$875,000


$827,400

Jan 1, 2007Salary:

$796,100

0%


$2,451,516


$1,651,580


$2,026,454


$2,026,454


$4,616,454

Actual: $667,200 (82%)

Maximum:$953,200

(118%)

Target:$476,600

(59%)

Salary:$813,450(100%)

0%

Actual: $580,600 (74%)

Maximum:$941,400

(120%)

Target:$470,700

(60%)

Salary:$784,575(100%)

0%

Kindler Chief Executive Officer

Shedlarz Vice Chairman

LaMattina Senior Vice President

Read Senior Vice President

Levin Chief Financial Officer

H. McKinnell Former CEO

K. Katen Vice Chairman

Executive Compensation: Overview Executive Compensation: Discussion and Analysis

Notice of Annual Meeting of Shareholders, Proxy Statement and 2006 Financial Report March 15, 2007 | 4544 | Notice of Annual Meeting of Shareholders, Proxy Statement and 2006 Financial Report March 15, 2007

SALARYWe use salaries to providea fixed amount of compen-sation for the executive’sregular work. Details: See “CompensationDiscussion and Analysis”section page xx.

BONUSConstitutes the annual cash bonusincentive awards made under theAnnual Cash Incentive Plan.Details: See “CompensationDiscussion and Analysis” sectionpage xx.

STOCK AWARDSThe amount we have expensed during 2006 under FAS 123R for all outstanding restricted stock,restricted stock units and performance shares. Details: See “Grants of Plan-BasedAwards” page xx.

TOTALS

TOTAL COMPENSATION

OPTION AWARDSThe amount we have expensedduring 2006 under FAS 123R foroutstanding stock option awards.Details: See Note 15, Share-BasedPayments page xx.

CHANGE IN PENSIONVALUE AND NON-QUALIFIED DEFERREDCOMPENSATION EARINGSThis column reflects pen-sion accruals only.Details: See Note 15,Share-Based Paymentspage xx.

ALL OTHERCOMPENSATIONPfizer’s Savings Planmatching contributionsand the incrementalcost to the Company ofperquisites received. Details: See notes onpage xx.


© 2007 Addison

CONCEPT MODEL

AFTER: APPEALING LAYOUT

27

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Executive Compensation: Our Compensation Program Executive Compensation: Discussion and Analysis


WHOM WE MEASURE OURSELVES AGAINSTWe set midpoint salaries, target bonus levels, and the target forannual long-term incentive awards at the median of both a peergroup of pharmaceutical companies and a general industry com-parison group of Fortune 100 companies. Where appropriate, weadjust the target to reflect Pfizer’s scale and scope. For salariesand cash bonuses, these adjustments are generally based on dif-ferences in revenues and market capitalization.

Our Pharmaceutical Peer Group For the performance periods beginning in 2002, 2003, and 2004,the pharmaceutical peer group consisted of Abbott Laboratories,Baxter International Inc., Bristol-Myers Squibb Company, ColgatePalmolive Company, Eli Lilly and Company, Johnson & Johnson,Merck and Co., Inc., Schering Plough Corporation, and Wyeth.

In determining our competitive positioning of compensation, wealso use a general industry comparison group of about one-half ofthe Fortune 100 companies that best align with our sales volume,cash flow, and market capitalization, as well as with the nature ofour business and workforce. The general industry peer group canchange from time to time based on our criteria.

HOW WE EVALUATE EXECUTIVE PERFORMANCEIn consultation with the Board, the Compensation Committee isresponsible for evaluating CEO performance. Working with theCEO, we evaluate the performance of the other Named ExecutiveOfficers and elected officers. We do not rely solely on predeter-mined formulas or a limited set of criteria when we evaluate theperformance of these officers. We focus on their individual objec-tives, which are typically agreed upon near the beginning of theperformance period. In 2006, we considered management’s con-tinuing achievement of set short- and long-term goals. We alsofocused on Mr. Kindler’s objectives and strategies designed tobuild shareholder value which were to

• achieve the financial goals of increasing shareholder value andmaximizing revenue, along with attaining specified earnings pershare, operating cash flow, and cost savings goals

• reorganize and rebuild the corporate leadership group andstrengthen senior leadership teams

• improve relationships with internal and external constituenciesand effectively communicate strategy and financial results toincrease shareholder value

• set new direction for Pfizer including internal reorganization andenhancing the focus on patients, doctors, customers, and busi-ness partners.

We based our compensation decisions for Mr. Kindler on ourassessment of the company’s overall performance, as well as onour assessment of his performance.

Evaluation of Mr. Kindler’s Performance In the face of many challenges in 2006, Pfizer substantiallyachieved a number of financial targets that were set early in theyear. The company took decisive action and delivered solid per-formance despite challenges, including the significant revenue lossfrom the expiration of patents for several key products. In 2006,the company had total revenues of $48.37 billion and adjusted

earnings of $14.98 billion, compared with revenues of $XX.XX bil-lion and adjusted earnings of $XX.XX in 2005. Overall, the com-pany achieved revenue growth of 2% for the year and delivered anadjusted diluted earnings per share of $2.06, exceeding WallStreet expectations.

During the fourth quarter, the company strengthened its commit-ment to enhancing total return to shareholders by completing thedivestiture of the Consumer Healthcare business for approximately$16.6 billion. In December 2006,the Board of Directors approved a21% increase in the first quarter2007 dividend to 29 cents pershare. This significant increasebuilds on a 26% dividend increase in2006. The company also continuedits substantial share purchase pro-gram by buying $7 billion of its com-mon stock during 2006.

Pfizer’s common stock price wentfrom $23.32 on December 31, 2005to $25.90 on December 31, 2006. Including dividends, the totalshareholder return for 2006 was 15.2% as compared to the aver-age pharmaceutical peer group total shareholder return of 11%.

In 2006, restructuring resulted in savings of approximately $2.6billion, $600 million ahead of the 2006 plan. In addition, under Mr.Kindler’s leadership, significant changes were made to streamlinedecision making processes by removing multiple layers of manage-ment and eliminating a number of committees.

Mr. Kindler established a new Executive Leadership Team and over-all management structure. Important strides were made in improv-ing relationships with both internal and external constituencies,including shareholders, customers, colleagues, and governmentofficials through increased transparency, clarity, responsiveness,and speed of strategy development and execution.

WHAT GOES INTO EXECUTIVE COMPENSATION

Our compensation program for executive officers consists of:

With these elements we can create a flexible package basing compensation on both the short- and long-term performance of the company and individual.

Long-Term – Stock Ownership

Requirements– Stock Options– Restricted Stock and

Restricted Stock Unit Awards

Employment and Post-Employment Benefits– Perquisites – Savings Plans– Disability and Death

Benefits– Post-Employment Benefits– Change-in-Control Payments

Short-Term – Salaries– Annual Cash Incentive

Awards– Benefit Plans + +

General Industry Comparison Group

Table X

AlcoaAllstateAltria GroupAmerican ExpressAIGBank of AmericaBoeingCardinal HealthCaterpillar

ChevronTexacoCitigroupCoca-ColaComcastConocoPhillipsDellDow ChemicalDuPontExxonMobil

Fannie MaeFedExFord MotorGeneral ElectricGeneral MotorsHewlett-PackardHoneywellIntelInternational Paper

IBMJ.P. Morgan ChaseLockheed MartinMerrill LynchMetLifeMicrosoftMotorolaPepsiCoProcter & Gamble

TimeWarnerUnited Parcel ServiceUnited TechnologiesUnitedHealth GroupVerizonViacomWachoviaWalt DisneyWells Fargo

Median Revenue

Median Net Income

Median Market Capitalization

$47.8

$21.4

$48.4

$19.3

$80.8

$76.1

$184.5

$5.4

$3.6

General Industry*

Pharmaceutical*

Pfizer

General Industry*

Pharmaceutical*

Pfizer

General Industry*

Pharmaceutical*

Pfizer

Comparative Financial Measures (in billions)

*General Industry Comparator Group and Pharmaceutical Peer GroupBased on available information as of March 1, 2007.

We do not rely solely onpredetermined formulasor a limited set of criteriawhen we evaluate the performance of theseofficers. We focus on theirindividual objectiveswhich typically reflectshort-term and certainstrategic goals.


© 2007 Addison

CONCEPT MODEL

AFTER: STRUCTURED INFORMATION

28

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Notice of Annual Meeting of Shareholders, Proxy Statement and 2006 Financial Report March 15, 2007 | 49

SALARIESWe base salary increases on an evaluation of the individual’s per-formance and level of pay compared to pharmaceutical and generalindustry comparator group pay levels for similar positions.

Salaries provide a fixed amount of compensation for the execu-tive’s regular work. We review the salaries of the Named ExecutiveOfficers annually, as well as at the time of a promotion or otherchange in responsibilities. We align salaries and target bonuseswith the median competitive data for cash compensation.

The Compensation Committee also approves any salary increasefor any and all elected corporate officer.

ANNUAL CASH INCENTIVE AWARDSIn 1997 shareholders approved the Pfizer Inc. Executive AnnualIncentive Plan Annual Cash Incentive Plan under which ExecutiveOfficers may be awarded annual cash bonuses. Executives may earnbonuses based on company and individual performance criteria,with the total amount limited to a maximum of 0.3% of the com-pany’s adjusted net income.

The 2006 target and actual cash incentive awards paid to each ofthe Named Executive Officers are shown in this table. The actualcash incentive awards are also shown in the Bonus column of theSummary Compensation Table in the Executive CompensationTables. The target awards, along with the actual salaries of theNamed Executive Officers, approximate the target total cash forsimilar positions at our peer companies.

Annual cash incentive awards – bonuses – are designed to rewardshort-term performance and achieving designated goals. Bonuslevels are expressed a percentage of a recipient’s base salary. Weapprove the performance objectives and then establish the targetbonus by analyzing the compensation for comparable positions inpharmaceutical and general industry peer-group companies. Wedesign the combined salaries and target bonus levels to approxi-mate the competitive median.

Because we determine the actual cash incentive award accordingto each Named Executive Officer’s level of achievement against hisor her individual financial and strategic performance objectives,the award may be either greater or less than the target bonusamount. If there are changes in an officer’s salary grade level thatbased on similar positions at our peer companies warrant a targetchange, we make prorated changes in the annual target bonus lev-els.

In 2006, the performance objectives for the Named ExecutiveOfficers generally included the following, depending on the officer’srole in the company.

In addition, as a result of the appointment of a new CEO at the endof July, the new leadership team developed additional overall objec-tives which focused heavily on initiatives and strategies designedto reorganize the company, set a new direction for Pfizer, and pro-duce long-term shareholder value. The specific performance objec-tives for each continuing Named Executive Officer are weightedaccording to the extent to which the officer will be responsible fordelivering results in achieving these overall objectives.

For 2006, the financial objectives reflected a significant level of dif-ficulty for the executives given the dynamic business environmentand the challenges posed by the loss of exclusivity for certain keyproducts. The strategic objectives required each executive to pro-duce significant results and achieve challenging targets in order toqualify for incentive payments. Financial objectives were weightedat 25% for Mr. Kindler and in the range of 20% to 50% for the othercontinuing Named Executive Officers. We determined these objec-tives assuming total revenue of $48.4 billion, adjusted dilutedearnings per share of $2.06, expense savings of $2.6 billion, andthrough the use of an operating cash flow metric. We also evalu-ated the new leadership team’s ability to deliver on the challenge ofdesigning strategies and actions needed to reorganize the com-pany forward and drive it forward.

While we used these metrics as a guideline to determine the por-tion of the annual cash incentives attributable to financial meas-ures, we only use strict formulaic achievement of financial metricsto determine performance share award payments. We incorporateflexibility into our bonus program to better align with the evolvingnature of our business. We may adjust the portion of the bonusrelated to financial objectives upward or downward to better alignwith the overall total shareholder return. To reinforce the impor-tance of stock price growth for the company, we granted Mr. Kindleronly options and performance shares.

A payment of $2,158,300 in lieu of a bonus for 2006 was made toDr. McKinnell under his Employment Agreement, which isdescribed in detail in the section headed “Departure of FormerChief Executive Officer”.

REWARDING SHORT-TERM PERFORMANCE


48 | Notice of Annual Meeting of Shareholders, Proxy Statement and 2006 Financial Report March 15, 2007

The Committee and the Board believe that Mr. Kindler has takendecisive action to set a new direction for Pfizer through both inter-nal reorganizations and external strategic focus.

Based on its overall assessment, the Committee decided to setMr. Kindler’s base salary at $1.5 million for 2007, and award anannual incentive of $3.3 million for 2006 performance, which alsoreflects his promotion to CEO. The Committee awarded Mr. Kindleroptions to purchase up to 760,000 shares of common stock, anda range of 0 to 310,400 performance shares for the three-yearperformance period 1/1/2007 through 12/31/2009, to beearned entirely based on Pfizer’s total shareholder return in relationto its pharmaceutical peer group.

These awards were approved by the Committee and ratified by theBoard.

Compensation for Jeffrey B. KindlerMr. Kindler became Chief Executive Officer effective July 31, 2006.As a result of his promotion, we approved new compensationarrangements for Mr. Kindler including an increase to base salaryfrom $947,500 to $1,350,000 and an increase to his targetannual bonus under the company’s Annual Cash Incentive Planfrom 65% to 150% of his new base salary.

We also approved an option to purchase500,000 shares of Pfizer common stockunder Pfizer’s 2004 Stock Plan at anexercise price of $26.29 per share, thefair market value of Pfizer common stockon July 31, 2006. The exercise pricewas set at the average of the highestand lowest trading price on the date ofgrant. The option will become exercis-able on the fifth anniversary of the date

of grant only if the average closing price of Pfizer common stock for20 consecutive trading days exceeds 150% of the exercise price.

In addition, we decided that any amount earned under any cur-rently outstanding Performance Contingent Share Awards andPerformance Share Awards held by Mr. Kindler would be settledthrough an award of restricted stock units, if the company’s actualtotal shareholder return achieved is less than the median totalshareholder return of the company’s pharmaceutical peer group.This decision will more closely align pay with performance.

Such restricted stock units will vest and become payable in sharesof Pfizer common stock if and when the company’s three-year totalshareholder return based on the rolling average over a three-yearperiod exceeds the median for the pharmaceutical peer group.Upon Mr. Kindler’s retirement or other termination other than fordeath or disability of employment, any of these restricted stockunits that remain unvested will be forfeited. If Mr. Kindler dies orbecomes disabled while in active service, these shares will vest.

POLICY IN EVENT OF FINANCIAL RESTATEMENTIt is the policy of the Board of Directors that the CompensationCommittee will, to the extent permitted by law, have the sole andabsolute authority to make retroactive adjustments to any cash orequity based incentive compensation paid to company officers andother officers where the payment was predicated upon the achieve-ment of specified financial results that were later the subject of arestatement.

Where applicable, the company will seek to recover any amountdetermined to have been inappropriately received by the individualexecutive.

TAX DEDUCTIBILITY OF COMPENSATIONSection 162 of the Internal Revenue Code of 1986 (as amended)places a limit of $1,000,000 on the amount of compensation thatPfizer may deduct in any one year for each of its five most highlypaid executive officers.

There is an exception to this limitation for performance-based com-pensation that meets certain requirements. Pfizer’s annual cashincentive compensation, stock option awards, performance shareawards, and performance contingent share awards generally areperformance-based compensation meeting those requirementsand are fully deductible.

To maintain flexibility in compensating executive officers in waysthat promote building shareholder value, we have not adopted apolicy requiring all compensation to be deductible. The salaries ofcurrent executive officers Mr. Kindler and Mr. Shedlarz, and formerexecutive officers Dr. McKinnell and Ms. Katen, who both left thecompany in 2006, are above the $1,000,000 threshold. Thus, aportion of their salaries and the Internal Revenue Service value oftheir perquisites are not deductible by the company.

Restricted stock and restricted stock units are not considered“performance-based compensation” under Section 162 are gener-ally not deductible. However, any restricted stock unit which is sub-ject to IRS Section 162 upon payment will be deferred either asshares or into a fund earning 120% of the Federal Long-Term rate.All other annual incentives and long- term incentive amounts will bedeductible when they are paid to the executive officers.

The company makes corporate aircraft available to its executivesto ensure their security and to make more efficient use of execu-tive time. Not all use of corporate aircraft is deductible. In 2006,the aircraft disallowance for the Named Executive Officers resultedin an out-of-pocket cost to the company of $1,050,000.

The Committee and the Board believe that Mr. Kindler has takendecisive action to set anew direction for Pfizerthrough both internalreorganizations andexternal strategic focus.

Financial Objectives: – revenues – adjusted earnings per share – cash flow from operations – productivity cost savings initiatives, and– certain divisional financial measures with a focus

on increasing shareholder value

Strategic Objectives: – deliver more new medicines more quickly to patients– execute the company’s Adapting to Scale initiative – promote new directions in health and wellness – shape a positive environment for better healthcare– develop people, talent, and organization, and – other operating responsibilities, as appropriate


© 2007 Addison

CONCEPT MODEL

AFTER: DETAILS PROVIDED

29

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Required tables and footnotes are presented as clearly as possible




2006 Option Exercises and Stock Vested Table

Number of NumberNumber of Number Withheld Total Number of Shares Total

Shares Value of Shares Shares Value of Shares Withheld ValueAcquired Realized on Acquired Sold to Realized Acquired to Cover Realized

Name on Exercise Exercise on Vesting Cover Taxes on Vesting on Vesting Taxes on Vesting

J. Kindler 13,120 4,594 $335,454 76,680 (1) $1,983,712D. Shedlarz 9,555 3,243 $253,641 73,440 31,240 $1,899,893J. LaMattina 7,299 2,303 $193,755 56,040 19,974 $1,449,755I. Read 51,948 $716,358 7,173 2,432 $190,410 42,600 (2) $1,102,062A. Levin 35,718 $498,690 6,486 2,202 $172,174 46,500 18,362 $1,202,955H. McKinnell 351,948 $4,845,937 — — 198,000 (2) $5,122,260K. Katen 342,552 $3,688,730 11,972 4,063 $317,802 111,120 49,257 $2,874,674

(1) These shares were paid as restricted stock units that will only vest when the Company's three- year total shareholder return exceeds the median of ourpharmaceutical peer group.

(2) The executive deferred receipt of these shares according to the executive’s elections on file.

(3) The performance shares in this table have been determined according to the 2002-2006 performance period and were paid on February 22, 2007.

Option Awards Restricted Stock Units Performance Shares3

2006 Nonqualified Deferred Compensation Table

Executive Pfizer Aggregate Aggregate AggregateContributions Contributions Earnings Withdrawals/ Balance at

Name Plan1 in Last FY in Last FY in Last FY Distributions Last FYE

J. Kindler Supplemental Savings Plan $113,124 $84,843 $97,575 — $ 794,138Deferred AIP — — 53,691 — 948,555Deferred PCSA 1,043,808 — 154,503 — 2,061,369Total: 1,156,932 84,843 305,769 — 3,804,062

D. Shedlarz Supplemental Savings Plan 281,433 84,430 346,717 — 4,831,229Deferred AIP — — — — —Deferred PCSA 2,321,844 — 1,618,456 — 14,074,731Total: 2,603,277 84,430 1,965,173 — 18,905,960

J. LaMattina Supplemental Savings Plan 144,057 64,825 144,434 — 1,273,289Deferred AIP 708,570 — 198,807 — 3,650,569Deferred PCSA 1,634,094 — 792,799 — 7,328,147Total: 2,486,721 64,825 1,136,040 — 12,252,005

I. Read Supplemental Savings Plan 75,944 56,958 83,157 — 745,698Deferred AIP 631,962 — 252,207 — 4,579,024Deferred PCSA 1,276,464 — 183,150 — 2,477,720Total: 1,984,370 56,958 518,514 — 7,802,442

A. Levin Supplemental Savings Plan 249,534 56,145 156,774 — 1,445,716Deferred AIP — — — —Deferred PCSA — — 638,983 — 4,756,571Total: 249,534 56,145 795,757 — 6,202,287

H. McKinnell Supplemental Savings Plan 862,574 258,772 2,269,285 — 13,555,163Deferred AIP 3,145,000 — 1,265,686 — 22,974,439Deferred PCSA 5,502,000 — 5,100,681 — 42,772,624Total: 9,509,574 258,772 8,635,652 — 79,302,226

K. Katen Supplemental Savings Plan 152,153 114,115 173,629 — 2,455,929Deferred AIP — — 132,276 — 2,336,923Deferred PCSA 3,334,212 — 1,893,259 — 17,004,152Total: 3,486,365 114,115 2,199,164 — 21,797,004

(1) The Supplemental Savings Plan contributions were based on the executives’ deferral election and the salary shown in the 2006 Summary CompensationTable, as well as bonuses paid in 2006, previously reported.

Table X

Table X

Equity IncentiveEquity Incentive Equity Incentive Plan Awards:

Plan Awards: Market Plan Awards: Market orNumber of Number of Value of Number of Payout Value

Number of Number of Securities Shares of Shares of Unearned of UnearnedSecurities Securities Underlying Units of Units Shares, Units Shares, Units

Underlying Underlying Unexercised Option Option Stock of Stock or Other Rights or Other RightsGrant (1) Unexercised Unexercised Unearned Exercise Expiration That Have That Have That Have That HaveDate or Options Options Options Price Date Not Vested Not Vested Not Vested Not VestedPerformance (#) (#) (#) ($) (#) ($) (#) ($)

Name Period Exercisable Unexercisable

A. Levin 8/28/1997 90000 18.35 8/27/20078/27/1998 99000 35.21 8/26/20084/22/1999 109950 42.07 4/21/20092/24/2000 66000 32.94 2/23/20102/22/2001 183000 45.34 2/21/20112/28/2002 60000 30000 41.30 2/27/20122/27/2003 30000 60000 29.33 2/26/20132/26/2004 100000 37.15 2/25/20143/25/2004 26913 $697,046 2/24/2005 192300 26.20 2/23/20152/23/2006 285000 26.20 2/22/2016 23731 6146321/1/2002 - 12/31/2006 46,500 $1,204,350 1/1/2003 - 12/31/2007 54,000 $1,398,600 1/1/2004 - 12/31/2008 61,500 $1,592,850 1/1/2005 - 12/31/2009 41,280 $1,069,152 1/1/2006 - 12/31/2008 23,070 $597,513

H. McKinnell8/28/1997 390000 18.35 8/27/20078/27/1998 390000 35.21 8/26/20084/22/1999 405450 42.07 4/21/20092/24/2000 330000 32.94 2/23/20102/22/2001 800000 45.34 2/21/20112/28/2002 600000 300000 41.30 2/27/20122/27/2003 333334 666666 29.33 2/26/20132/26/2004 525000 37.15 2/25/20143/25/2004 136037 $3,523,358 2/24/2005 880000 26.20 2/23/20152/23/2006 880000 26.20 2/22/2016 91736 $2,375,962 1/1/2002 - 12/31/2006 198,000 $5,128,200 1/1/2003 - 12/31/2007 198,000 $5,128,200 1/1/2004 - 12/31/2008 265,000 $6,863,500 1/1/2005 - 12/31/2009 172,920 $4,478,628 1/1/2006 - 12/31/2008 89,180 $2,309,762

K. Katen 8/28/1997 5448 18.35 8/27/20078/27/1998 210000 35.21 8/26/20084/22/1999 225450 42.07 4/21/20092/24/2000 165000 32.94 2/23/20102/22/2001 330000 45.34 2/21/20112/28/2002 166667 83333 41.3 2/27/20122/27/2003 91667 183333 29.33 2/26/20132/26/2004 350000 37.15 2/25/20143/25/2004 73727 $1,909,529 2/24/2005 371000 26.2 2/23/20152/23/2006 500000 26.2 2/22/2016 48830 $1,264,697 1/1/2002 - 12/31/2006 111,120 $2,878,008 1/1/2003 - 12/31/2007 120,840 $3,129,756 1/1/2004 - 12/31/2008 128,220 $3,320,898 1/1/2005 - 12/31/2009 83,330 $2,158,247 1/1/2006 - 12/31/2008 47,470 $1,229,473

(1) For better understanding of this table, we have included an additional column showing the grant date of the stock options and restricted stock units and the associatedperformance period for the performance share awards.

(2) Mr. Kindler received a special performance-based stock option grant in July, 2006. Details of this award are discussed in the Compensation Discussion and Analysis sec-tion.

Outstanding Equity Awards at Fiscal Year-End 2006 continued

Option Awards(3) Stock Awards(3)


© 2007 Addison

USER TESTING RESULTS

Summary

WHAT WERE WE ABLE TO ACHIEVE?

Investors we tested were able to find the information they were looking for.

The information was more clear.

The information they got was information they could understand.

30


© 2007 Addison

FUTURE FORECAST

Summary

WHAT WILL YOU SEE NEXT YEAR?

Probably the same format, although the content will be different. The players will change.

With this approach, it’s not a “one size fits all”. You have to write your CD&A in a way that tells your company’s story.

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